alk about a battle between the bulls and the bears. The months of August and September have seen the stock market being pulled up sharply by the bulls and then dragged down violently by the bears.
It has truly been a tug-of-war market.
That has made it extremely difficult for bulls and also bears.
So, what is one to do? Well, if it's a tug-of-war and you are a bull, you obviously want to go with "muscle stocks".
What is a "muscle stock"?
It is a stock that is performing well for bulls despite the choppy market. It is a company whose earnings will be exceptionally strong. It is a stock that is able to push higher despite the drag of some sharp market sell-offs.
So, what one needs to look for is a company with an outstanding earnings outlook whose stock is still pushing toward new multi-year highs. The upside potential for a "muscle stock" could turn out to be extremely good if the stock market were to break out to the up side with a strong move.
One stock that fits the bill is Jazz Pharmaceuticals Inc. (JAZZ) based in Palo Alto, CA. The company, with annual sales of 173 million dollars, seeks to develop products for unmet medical needs in neurology and psychiatry.
The company has two products: The first is Xyrem used to treat cataplexy and excessive daytime sleepiness in patients with narcolepsy. The other product is Luvox used to treat obsessive compulsive disorders. Jazz is also working on a product to treat repetitive seizures caused by epilepsy.
This year, analysts are forecasting that Jazz will show a 154 percent surge in profits, to 3.10 a share from 1.22 a year ago. Next year, they project net will climb 30 percent to 4.03 a share from the anticipated 3.10 for 2011.
This year, Jazz's stock has climbed from 20 to 43.53, a gain of 117 percent. The stock recently made a new all-time high in September of 47.88. Technically, the stock is holding nicely above its rising 50-day moving average line. That shows the stock is in a solid up trend despite the zig-zag action of the stock market.
Another "muscle stock" is Questcor Pharmaceuticals Inc. (QCOR). The company, with annual sales of 115 million dollars, produces a medical product called H.P. Acthar Gel. It is an injectable drug used to treat 19 indications.
The major uses are to treat acute exacerbations of multiple sclerosis in adults and infantile spasms in infants and children under two years of age. The company also produces Doral, which is used to treat insomnia.
Wall Street is forecasting that Questor will post a 54 percent gain in earnings this year, to 86 cents a share from 56 cents a year ago. Going out to 2012, profits are projected to rise 52 percent, to 1.31 a share.
Net for the upcoming third quarter should climb 24 percent, and then in the fourth quarter, 130 percent. That is an acceleration in quarterly earnings growth, which is a very bullish fundamental for a stock.
Questcor's stock has soared from 4 dollars two years ago to a peak of 32.78. The stock is now in a 10-week flat base and rallying across the base with a pick-up in volume. It is well positioned for a possible breakout to a new high.
Another key characteristic of a "muscle stock" is that it has some good institutional following on The Street. In the case of Jazz Pharmaceutical, a key fund buyer of the stock was 4-star-rated T. Rowe Price Health Sciences Fund. It recently purchased 445,000 shares. The fund has a 1.1 percent share of Jazz's stock.
In the case of Questcor, 4-star-rated Pioneer Oak Ridge Small Cap Growth Fund has a 1.1 percent stake. Also, several index funds have been big buyers of Questcor's stock.
Other stocks could get a "muscle rating" and have been performing well. They are Range Resources Inc. (RRC), trading at 59.88, Athenahealth Inc. (ATHN), at 63.09, and the more speculative Cepheid Inc. (CPHD) at 40.10. |
发表于 2011-11-13 09:12
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